Recession

Sooner or Later?

Why You Should Not Underestimate The Severity Of The Coming Recession

Make no mistake: numerous bubbles have formed during the low interest rate period of the past decade and there is no way of escaping their ultimate popping. These bubbles are forming in global debt, China, Hong Kong, Singapore, emerging markets, Canada, Australia, New Zealand, European real estate, the art market, U.S. stocks, U.S. household wealth, corporate debt, leveraged loans, U.S. student loans, U.S. auto loans, tech startups, shale energy, global skyscraper construction, U.S. commercial real estate, the U.S. restaurant industry, U.S. healthcare, and U.S. housing once again. 

There are likely even more bubbles than I listed – we just won’t know until they all burst. As Warren Buffett once said “only when the tide goes out do you discover who’s been swimming naked.” I believe that the current bubble situation, when looked at globally, is even worse than it was before the 2008 Global Financial Crisis – that’s why the coming crisis is actually likely to be far worse than 2008. How’s that for an unpopular opinion?!

 My view, however, is that virtually everyone is underestimating the tremendous economic risks that have built up globally during the past decade of extremely stimulative monetary policies.

DYI:  Over the past few months I’ve been saying the possibility/probability of an upcoming recession is growing.  Obviously after ten years of growth – mainly pushed by debt expansion – one would expect a recession to eventually arrive.  Out of the many indicators that economists look at more and more are showing another downturn is coming sooner than later.  Somewhere between the next six months to two years.  Predicting when the next recession will hit is very hard to do as so many economists know but attempt anyway.

 

So far I don’t see a harsh downturn as this author is predicting as we don’t have the insane levels of massive speculation prior to the 2009 downturn.  There are pockets of house flipping but not as a national pastime.

Stocks for sure have been bid up to moon however the majority of this is within the upper middle class and above.  Again it is not a national pastime that we had going on during the 1990’s along with many holding large margin positions.  The only way I see this turning into a huge downturn is if all of the other countries are pushed over like dominoes.

 DYI